Staples 2013 Annual Report Download - page 158

STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
C-27
The following summarizes the activity related to the Company's unrecognized tax benefits, including those related to
discontinued operations (in thousands):
2013 2012 2011
Balance at beginning of fiscal year $ 254,724 $ 250,397 $ 254,167
Additions for tax positions related to current year 28,390 39,989 48,032
Additions for tax positions of prior years 4,350 11,058 15,361
Reduction for statute of limitations expiration (6,240)(30,116)(13,441)
Settlements (265)(16,604)(53,722)
Balance at end of fiscal year $ 280,959 $ 254,724 $ 250,397
Staples is subject to U.S. federal income tax, as well as income tax of multiple state and foreign jurisdictions. The
Company has substantially concluded all U.S. federal income tax matters for years through 2007. All material state, local and
foreign income tax matters for years through 2002 have been substantially concluded.
Staples' continuing practice is to recognize interest and penalties related to income tax matters in income tax expense.
The Company recognized interest and penalties related to income tax matters of $9.1 million, $7.2 million and $2.6 million in
2013, 2012 and 2011, respectively. The Company had $46.7 million and $37.7 million accrued for gross interest and penalties as
of February 1, 2014 and February 2, 2013, respectively.
Note K — Equity Based Employee Benefit Plans
Staples offers its associates share ownership through certain equity-based employee compensation and benefit plans. In
connection with these plans, Staples recognized approximately $80.6 million, $117.8 million and $151.8 million of compensation
expense for 2013, 2012 and 2011, respectively. The total income tax benefit related to stock-based compensation was $22.7
million, $36.0 million, $46.3 million for 2013, 2012 and 2011, respectively. As of February 1, 2014, Staples had $88.3 million
of unamortized stock compensation expense associated with its equity-based plans, which will be expensed over a weighted-
average period of 1.5 years.
Employee Stock Purchase Plan
Staples offers its associates the opportunity for share ownership pursuant to the 2012 Employee Stock Purchase Plan.
U.S. and International associates may purchase shares of Staples common stock at 85% of the lower of the market price of the
common stock at the beginning or end of an offering period through payroll deductions in an amount not to exceed 10% of an
employee’s annual base compensation. During 2013, 2012 and 2011 the Company issued 3.8 million, 4.5 million, and 3.8 million
shares, respectively, pursuant to the 2012 Employee Stock Purchase Plan.
Stock Award Plan
Under the Amended and Restated 2004 Stock Incentive Plan, the Company grants restricted stock and restricted stock
units (collectively, “Restricted Shares”) and nonqualified stock options to associates. Shares issued pursuant to restricted stock
awards are restricted in that they are not transferable until they vest. Shares underlying awards of restricted stock units are not
issued until the units vest. Nonqualified stock options cannot be exercised until they vest. For stock awards with service conditions
only, vesting occurs over different periods, depending on the terms of the individual award, but expenses relating to these awards
are recognized on a straight line basis over the applicable vesting period. For awards that include performance conditions, the
Company recognizes compensation expense during the performance period to the extent achievement of the performance condition
is deemed probable relative to targeted performance. A change in the Company's estimate of the probable outcome of a performance
condition is accounted for in the period of the change by recording a cumulative catch-up adjustment.